A Trillion Euros Didn’t Buy Much Time

Europe’s bankers will need to think really big the next time they try to construct a proper “mother of all firewalls.” A nearly trillion-euro package that was on the table a few weeks ago would combine €440 billion of uncommitted funds from an existing credit “facility” with  €500 billion pledged toward a new one. Those may sound like big numbers, but they evidently were not big enough to prevent market forces from roiling Europe’s stage-managed bond markets last week. The result was a surge in yields on Spanish debt  that spooked U.S. stocks, among others,  into their worst weekly decline of 2012.

Although the world’s bourses had celebrated in the weeks leading up to and immediately after the February bailout of Greece by central banking’s wizards and alchemists, stocks have been falling steadily since the beginning of April. Clearly, the specious extravagance of a trillion-eurofund doesn’t buy much peace of mind in financial circles these days. That’s notwithstanding the obvious fact that the countries charged with funding the “facility” would have to pony up only a small fraction of the marquee sum. As much should be clear to all the players, since even the ostensibly solvent likes of Germany, Holland and Finland don’t have that much good money to throw after bad, nor the will to import austerity by-the-empty-truckload in support of a doomed euro and a bunch of sovereign deadbeats.

Private Lenders Flee Spain

For their part, U.S. stocks looked dismal last week, with the Dow off 1.6% and the S&Ps down 2%.   However, such relatively mild selling may prove to be just a warning tremor if Europe’s debt crisis is about to return to the headlines.  On Friday, investors’ fears ratcheted into the red zone when it became apparent that a tidal surge of borrowing from the European Central Bank had been necessary to keep Spain’s banks afloat in March.  And where were private lenders in Iberia’s hour of need?  It would appear that they deserted the country in droves. As how could they not have?  Would you lend money to Spain? We surely wouldn’t. Suppose the central bank gave you money to lend to Greece, and it came with few strings attached and at almost zero interest.  Hard to lose, right?  Not exactly. Just ask those who loaned to Greece on the assumption that the country would never be allowed to default. Although a default was indeed postponed, bondholders had to walk the plank before any further public sums were advanced cash-strapped Athens.

Some actual pain was necessary, since Greece’s already unruly mobs would never have stood for letting the banks off the hook yet again with only nominal losses. Recall that late last year, in the throes of a middling eurobailout valued in the low hundreds of billions of dollars, the actual exposure of private banks was revealed to be around $10 billion. Those days are over, apparently, and with them the popular delusion that moral hazard can be stretched to infinity.

A Tireless Deception

In the meantime, the ECB and the Fed continue to work tirelessly to promote the deception that market forces are being allowed to work. Only the news media would buy into such a laughable story — and even they wouldn’t be fooled if Europe’s banks had been required to “lend European.”  True, the alternatives are not exactly appealing, since it comes down to either 1) paying 50 basis points per annum to park excess cash with the ECB; or, 2) deploying said excesses in U.S. and German paper despite niggardly yields.  Understandably, the banks have chosen pragmatism over pan-european solidarity.   But if they should continue to do so, effectively favoring safety over yield, we should expect Europe’s steadily deepening crisis to take a turn for the worse. Although Treasury debt and the U.S. dollar would benefit directly from this, investors would be mistaken to infer that a rise in the value of U.S. paper portends America’s imminent return to economic health.


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  • Steve April 18, 2012, 1:08 am

    Bradley, I’ve seen no national wall of worry. All I have heard nationally is that the good timez are here, the bull rules and the fed can spend its way to heaven. Only on a few sites like this one is there any worry.

  • Bradley April 18, 2012, 12:41 am

    It seems like a futile task, arguing against those who will find reasons not to put money into this, (or for some, any) market. That’s why they call it a “wall of worry”. There are ALWAYS good reasons not to play the game, fight the man, believe in the credulity of others, or put your money on the line. That’s why so many of us are sucked in near the top of bull markets, because we exhaust every reason not to join the crowd.

    There is a possibility that the rally in equities since early 2009 is built on nothing but lies and trumped up numbers. It is possible that it is all due to liquidity provided by the Fed. It is possible that we will have a flash crash from which our economic system will never recover. One never knows.

    I have a friend who spends probably too much time thinking about all of this, and who trades quite a bit. He takes positions in small gold miners, the VXX, speculative natural gas companies, etc, etc. He does quite well for himself, and is endlessly fascinated by our current state of affairs.
    Yet at the same time, he often says that the course chosen by my wife, (to keep most of her recently made money in cash for the past number of years), is wise.

    For her.

    He doubts what he reads coming out of Washington (employment numbers, various statistics, etc), often shares his doubts about where our economy is going and the underpinnings of the rally we have seen in equities. Yet he loves to “put his money where his mouth is”. It is a game to him, made more interesting because of the risk of having real money on the line.

    There is not a chance in hell that I could convince him to act like her, nor her to act like him…and I wouldn’t have it any other way.

  • Mario cavolo April 17, 2012, 7:49 pm

    Look at the recent market rallies…yesterday the dow rallying while all else falling… I’m short the euro via simple euo May puts and I can only watch w / amusement the euro and markets are actually rallying on “good” news… What a joke…a small investor/trader can’t win can’t win can’t win…M

    • gary leibowitz April 17, 2012, 8:47 pm

      If you were under the premise that we were in a bull market for 4 years it would be hard to lose in the long run. Once determining the right general direction, especially this one, the bias should always be to buy the dips. The steeper the dips the better the return on bullish bets.

      Me, I never in my wildest imagintion expected to see a 4 year move like we have had. If you step back and look at facts that drive markets you will see why. Please don’t confuse reasons behind the facts and actual results. If governments can rig the markets for 4 years than my hat is off to them. I do believe they are doing everything in their power to thwart a meltdown but that doesn’t mean the profits were any less real.

      I stated at the end of last year I believe we are in a “sweet spot” where slow growth and jobs will actually help prolong this bull run and produce double digit returns. I see no dichotomy between believing it will end bad and investing until it does.

    • Steve April 17, 2012, 10:29 pm

      Gary, many intelligent people saw this ‘rally’ for what it is long ago. Many projected at least a 90% retracement, some more. When the market tops 100% it becomes a real Bull, until then the market is nothing but hope and faith built upon monetary fraud. Right now everone believes in the Bull. However, that does not negate the intelligence of your system that took you out of the market with a 1.5 fall. The game is only over when we turn to dust showing whether or not we passsed Liberty or slavery on to our sons. So far, the whole theory of only taking a 1.5 loss is bogus because that still leaves one in Fee with only slavery to pass to the future sons and daughters.

    • gary leibowitz April 17, 2012, 11:43 pm

      Most people analyze companies and thier growth or profit potential. So far it has been one of the best 4 years ever in terms of accelerated growth. Granted it was from a low base. If you refuse to invest becuase you don’t like the way they are receiving their profits than by all means stay out of the market.

      If your reasons for current sales is becuase of increased debt and you see that as an immediate failed proposition than show me. Credit card use exploded from 1982 to today. Should you not invest all those years? Surely any reason you come up with has to be justified. It gets justified by waning sales due to saturated debt burden. Right now people are spending. If you know for certain when that ends I would love to know.

      Do you really need to know the “why” of investing? If you follow your own golden rules for investing based on company fundamentals and technical trends isn’t that enough? To guess the “why” and “when” is futile. In the end the market telegraphs these things. If you stay unemotional about it than you will enter or exit at the proper time. You can’t catch the best entry or exit but you can avoid the disasterous buy and hold philosophy.

      I will give it a rest on posting here. If I change my mind on the general direction of this economy I will post, if not than I will talk to you all after elections.

      Have a good one.


      In better times, it took “only” an unsustainable $2+ of new debt to generate $1 worth of GDP growth at the margin. These days, it is taking more than $9 to achieve that same $1 of growth. I rest my case. You can take or leave my earlier assertion that neither you — Gary Leibowitz — nor anyone else still in the market will escape damage when the whole shoddy edifice comes crashing down. RA

    • Steve April 18, 2012, 1:05 am

      The point has been missed.

  • gary leibowitz April 17, 2012, 3:07 pm

    Spain’s bond auction went very well, selling 3.2 billion. They did have to raise the intersst rates but demand came rushing back. Do not believe there is any manipulation or government buybacks. It is more logical that risk is coming back after 4 years of caution. Most investors expect the EU will indefinitely prop up the failing countries. I myself will not take that bet. The European stock market is up. Looks like they kicked the can once again down the road.

    It’s been 4 years of spectacular stock market returns and corporate earnings and I suspect a 5th year will be added. While I must agree with the notion that the world government interventions will in the end fail, it has proped up the economies for much longer than anyone would like to admit. In fact, had the EU not become a basket case we might have skirted a deflationary depression.

    • Rick Ackerman April 17, 2012, 6:02 pm

      Oh, p-u-l-e-a-s-e, Gary, give me a break! Where do you think the “money” came from to buy those bonds? Hint: It did NOT come from savers.

    • Steve April 17, 2012, 7:41 pm

      Gary, are you Free to hold an Allodial Title? Or, is there a subscription in the future based upon the debtor in possession feel good theory of a Fee Simple Absolute Deed (which is fife, feod, feud, feudal, tenant in fee, peon, serf, slave). One silver specie Dollar has more value than all of the contracts held with a Broker who owns the stock with a promise to pay you if the broker has anything in the end corruption. One Dollar has more value than all of the Federal Reserve Notes ever printed. See Gary, if the Certificate is not held in hand there is only a contract of hope and faith with the broker. The Broker owns the Certificate, you own a promise. If the Certificate was discharged by a debtor in possession – no Liberty. It always appears and has always worked that persons will release Liberty for security every time until they have nothing but subject status. It is not REAL Gary, that is the debt auctions. Are you at Liberty Gary ? I’d say no, that the subscription is to a belief that security is better than Liberty. I believe that Gary would rather trade the master’s money to enslave others than be at Liberty. Would you fight for that original state of Liberty? Or, are you happy to be secure knowing that someone holds the Certificate providing a promise?

      In the end it might not matter. To hold a piece of land in Allodium, or in Fee – one is still on the land. The distinction is that I may Lawfully and Rightfully defend Right. The holder of the Fee may only defend the master to whom the fee is paid. To most it does not matter as long as they get “use”.

      Hold 10 million notes of debt evidence ? All that tells me is that the holder of the 10,000,000 tally is higher of the slave pole than the guy that holds 1 million. That 10 million tally tells me that the holder of the 10 million was able to hurt more free men and to trick more of their brothers out of Liberty and into a fee system of feudalism owning to the lord of Lands.

    • gary leibowitz April 17, 2012, 8:39 pm

      It seems absolutely everything is rigged according to you. I guess the 4 years of great earnings were falsified. If not falsified than it was “rigged” by the governments change of rules. Trying to defend “facts” is impossible since your answers are never provable or even showing an evidential trail.

      According to you this whole 4 plus years has been nothing more than government manipulation. If true than why in the world would you suggest that it has to end?

      It’s like trying to argue whether there have been aliens from outer space infiltrating our society for centuries.

      Why bring up the fact that Spain’s bond yields spiked to the highest its been if you conclude governments are buying it back anyway? I guess it spiked to make it look real? In fact why bring up any bad news since it is most probably “faked” anyway. I find it hard to understand why you accept bad news but disregard good news as being manipulated.

      The whole world has pulled off a 4 year coup? Sorry but I don’t buy it. No one person, let alone whole governments are that good. The known manipulations are transparent to all. They didn’t hide QE1 – X, low yields, giveaways to banks. In fact that is the basis for most discussions today.

      I guess earnings, government economic data, and any form of measuring the economy should be thrown out the window. I suppose in 50 years we will learn the truth behind the global scam.


      In point of fact, Gary — yes, everything is rigged
      . RA

    • gary leibowitz April 17, 2012, 8:58 pm

      “Did not come from savers”. Well I guess that holds true for the .8 percent spending surge 2 months ago, and 1 percent surge last month. According to you we can’t afford to spend yet sales numbers (faked) seem to prove otherwise. If China and India can have strong economic trends despite the huge numbers of poor and disenfranchised than I guess we can too.

      High yields mean higher risk along with returns. People take advantage of the “fear factor”. I personally think that investing in U.S. municipalities is a crap shoot.

    • Steve April 17, 2012, 10:21 pm

      Gary, the increase in spending did not come from people’s savings accounts. It came from debt and more debt. I’d guess that debt instruments is all that is held in this theory. Accounting standards, did ya every study GM and how they were allowed to project future earnings @ 10% on money they had not yet put into retirement trust accounts. My Dad said “figures don’t lie, but; liars figure”. I figure he was on the top of the heap when it came to real understanding of value and wealth, not electron blips tallying servitude to the master.

  • John Jay April 17, 2012, 2:41 pm

    Speaking of “people running to the USA”, here is a link to an article about Chinese women coming to the USA solely for the purpose of having the baby born on US soil with all that entails.
    “Chins’s new export to America: A baby boom”

    • mario cavolo April 17, 2012, 3:22 pm

      yep!! the other is HK where the hospitals have been flooded with an ever increasing # of mainland women going to HK to give birth to get permanent residence and other benefits of HK citizenry for the newly born child…they started imposing quotas, etc….M

  • Buster April 17, 2012, 2:03 pm

    America is a great country. As with any business, its success is based on the balance of its assets against its liabilities. Its assets are a plentiful supply of natural resources; land & minerals, plus 300 million specimens of the most creative creature on planet Earth.

    These assets are hindered by one main liability, a ruling class who imported a monetary system of theirs from Europe a while ago. It is a non-free market system which is enough of a hindrance to negate all the positives of any country in time. A simple enough system to understand, yet very seldom understood, even by the most intelligent among us, it would seem. It operates on the simple rule that currency is borrowed into existence with interest bearing on it at a given rate. The critical point to recognise is that the interest owing is not issued by the lender, only the principal, thereby meaning that the interest either has to be paid out of the sum of principal borrowed, or by confiscation of real physical assets, ie. ‘real wealth’. The only thing keeping this eventuality from occurring is if a new borrower adds more money, borrowed as yet more debt, into the economy.

    This is why such a monetary system requires ever more investing manias to perpetuate itself. After exhausting the supply of manias of things of no real consequence such as tulips, the wizards of this system centred mostly around a company known as Goldman Sachs, moved on to turning very critical wealth into the biggest mania in history, ie. the buildings we all live in. Once this mania had run its course to the extreme by changing the rules or committing outright financial fraud as we now know, & no new borrowers could be dragged in off the street, the ‘flaw’ in the system became manifest, as the interest payments were not being covered by new money borrowed into the economies of the world.

    Now things got interesting. Since not enough currency is in existence to cover all the debt owed to the lender, then the assets, real things or ‘real wealth’, are now owed to the lenders. The problem with this is that if the lenders acted upon this fact the populations of the developed world would quickly realise that they are all in fact broke, as all property would get consumed by the Banksters as repayment, leading no doubt to a world wide revolt against the secret overlords of this system. So, instead of this, things have been manoeuvred to allow a more gradual slow ‘boiling of the frog’, or austerity programs coupled with placing ex-Goldman Sachs employees into key government positions across the western world.

    On an accounting level, huge bail-outs will continue to be necessary to keep the system’s head above water, or rather to keep those within ‘the club’ in the lifestyles they have become accustomed to, perpetually unless or until a new bigger mania is devised that could add enough borrowed debt currency into the system to cover the current interest payments, but bringing more burden in so doing. The carbon credit system is possibly such a new mania??

    Alan Greenspan famously said that they found a flaw in their financial model. Yeah, right!! The flaw was the very foundation of the model deliberately designed so centuries ago. Understanding of this ‘flaw’ is the last thing the powers that be wish for the masses to acquire. Simply put, due to the fact that only the principle is borrowed into existence, not the interest, the result is never ending debt allowing that the real wealth of miners, farmers, builders, engineers, fisherman & any other positive endeavour to be taken for free by those in ‘the club’. ie. theft or fraud.

    Some, educated to think just as the Wizards have designed, will argue that this is a simplistic way of seeing things, citing their training in financial models & graphs, yet all deliberately designed to confuse & hide the simplicity of it all. As Ricks hidden pivot method no doubt demonstrates, the intelligent see just the complexity, but the wise find the simplicity.

    America, as every country exists in a world of unimaginable abundance & we humans are blessed with the minds to realise it. We’re just presently snookered by a self-seeking ‘liability’ that thwarts it.

    May we all one day realise that abundance.

    • Steve April 17, 2012, 7:20 pm

      Tennant in Fee, debtor in possession. That is your great society with the task masters abusing their own. Great job in putting forth reality.

    • Buster April 17, 2012, 8:08 pm

      Steve, as you & others have well highlighted, to simplify the matter still further we need to look at this from a legal, or justice perspective. That is the way the system was compromised & no doubt is the way it could be fixed.
      Thanks to you & those others here for all your insights in these matters.

  • max lopez April 17, 2012, 4:31 am

    well i live in southamerica, and it is very true that in many countries here the brand … made in usa … caries significant status.. it is percieved as being superiorly crafted.. i really dont know how true it is. ,

    however there are increasingly more goods imported from china available here. some good, some junk. but various pirates here copy and counterfeit products from usa , and have them made in china , copy packaging and stickers and sell them here for higher prices and greater apeal. go figure. i believe it to be true. the perception that made in usa is better is still widely held..

    and having lived in usa before, there are many things you all take for granted.. like the beautiful architecture. the great cities. chicago, newyork , boston philly.. the diverse food and ethnicities. try getting a cheesesteak or good indian food italian, pirogies, etc in most non u.s. countries.. try focusing on the incredible abundance of choice you still have and maybe more of that will start to show up…..

    sure there is lots wrong, but don’t ignore or devalue what’s right… and move toward that.

    • gary leibowitz April 17, 2012, 4:51 am

      How true. “We don’t know what we got till it’s gone”.

      The complaints here echo shallow since we all live on this planet and America is perhaps the most unique and freest place to live.

      Listening to most here you would think that the gulag is in place, taking away your rights and freedom in the dead of night.

      Greed and human nature have always worked in cycles and extremes. There is no grand scheme or goal to “control” everyones thoughts and actions. We just happen to live at the cusp of another great change, or upheaval.

      In fact I would argue we are in such dire straits only because we are allowed such freedom. How’s North Korea’s economic cycles doing, their rights and freedoms? Are they more subjugated now?

      With freedom comes the right, if not the law of nature, to grab what we can when we can. Natural evolution for the smartest and most powerful to want even more. In the end however this over reach always backfires. Two steps back, three forward.


      Let’s not compare America to Iran and Somalia, but to the America that existed before the Fed and income taxes — the America before SWAT teams were used to confiscate raw milk products sold by dairy co-ops, and to seize (and autopsy) imported sheep (incorrectly) suspected of harboring a disease — Mad Cow — that has never appeared in sheep. RA

    • mario cavolo April 17, 2012, 6:23 am

      have to agree Max….with all the criticisms we can easily make regarding problems in the U.S. , I also readily and objectively notice that every time we go back for our on average once per year visit, my wife and I have a fabulous time for many reasons including the people, the places, the style, the lovely diversity, the consistency. I have many European friends here in Shanghai who also speak very highly to these other admirable aspects of America and American life.

      Cheers, Mario

    • mario cavolo April 17, 2012, 6:27 am

      Well actually Gary, “the gulag is here taking away your freedoms in the dead of night” is a statement with a decent amount of truth in it if you take a mindful, pragmatic pause to make a list of the deteriorations that have taken place in the society and its laws.

      However, as we are taking the time at this moment to comment; this does not negate nor destroy the many wonderful things about America which are still in place.

    • Steve April 17, 2012, 7:17 pm

      Being a Baathist in Iraq was good before the Americans destroyed everything. In the same light. Living and fighting for the Liberty to be free of democracy control here in the U.S. is a life of oppression and abuses. Try standing up against democracy in defense of the Republic and see how good life is in this military state.

  • Mark Uzick April 16, 2012, 7:08 pm

    Robert: Yes, it is uniquely ironic that the Chinese lust after products that are made just down the street in their own factories, but since they carry the copyright and label of a brand name originated in the US, they somehow promote a superior desire for personal possession…

    But those are the real American products; i-phones are uniquely American – Chevy is UN-American; America is not so much a place as it is an idea, an ideal and an attitude.

    • Mark Uzick April 16, 2012, 7:56 pm

      The US not only engages in foreign adventurism and “nation building” (occupation) but has been at war with America for some time now – even often calling it domestic war, as in “the war on drugs”; and these wars, whether identified as such or not, have spread to attacking virtually every aspect of individual sovereignty.

      Any parts of us that are still to some degree American, while living in its ruins, are so mostly in our inner ideals but we live lives that are largely exiled from our dreams, awaiting the day we can return home.

    • Steve April 17, 2012, 7:10 pm

      Mark, read the Emergency Banking Act and the Trading with the Enemy Act – a Republican Form of Government is the enemy of any democracy/ mobocracy. Look at the Colors/Symbol of the military Commander in Chief in your state house. Liberty is the enemy – enslavement will get ya benefits in common with outlaw congressmen. I really do not understand how anyone can look at the Colors of the Commander and Chief, then read 4 United States Code 1 and not understand the military emergency and powers illegally enforced here.

    • Steve April 17, 2012, 7:12 pm

      Mark, thanks for making a ‘stand’. This Nation was built by making a Stand (in the heart and by deed), not by running away because doing Right is hard.

  • mava April 16, 2012, 6:40 pm

    We are reliving Atlas Shrugged. I think we live in awesome times. Everyone worth any substance has left for China, and like Mario says, the only thing that remains here are the brand names.

    Like what? Ford? Do you really, seriously want to buy Ford? Lol! I don’t! Chevy? Yeah, may-be Silverado or Tahoe, but NOT at these prices! They are great trucks at $20 grand a piece! Whirpool? You’d take that over Sharp? Not me.

    Forget it. Everyone of substance has left or is leaving. The Government is all that remains. The Government and those who can’t have enough of it. Good luck. There will come a day when you will have to get off the couch and actually start working.

    The freedom to move around is the greatest freedom there exist on earth today. The freedom to say: “Oh, so you want to tax and regulate me to death? Fine, then I’ll go to China. Do as you wish, but without me”.

    I expect that the governments around the world do realize this too, and are planning around their immediate need to curtail this freedom of movement. For as long as there exist one “Tax Haven” as they call it, but we will say the Land of the Free, and the freedom to move there, there can not be any efficiently built dictatorship.

    This is because, let’s face it, given the actual freedom to choose, working people never choose socialism.

    • Steve April 17, 2012, 7:05 pm

      The choice was made over 136 years ago to abandon Freedom to create a slave state in subject status. So Mario, are your U.S. subject citizenship wages tax free while in China as indicated by MAVA? Or, does the U.S. subject get sheared by U.S. taxes no matter where that enfranchised person resides in business?

    • Mario cavolo April 18, 2012, 5:55 am

      Currently China is tightening up to collect more taxes from foreigners here, cutting tax breaks for foreign companies here, being a bigger pain in the ass as their position has strengthened. It is becoming more not less difficult to be here.

      Yet, those are the relative facts as packing it up to start fresh in China/Asia is on the rise.

      Fact is, thousands of schools across the country will pay you $1000-$2000/mo after taxes plus benefits / apt to teach English and be the token foreign face around town. With low expenses your life ain’t what you might have previously imagined but you,re out of the rat race and easily socking away 50% of your pay.

      In China, employers have to pay around 40% of base salary in addnl income taxes, social and medical insurance, to the govt. When anyone talks salary in China they are talking net take home pay, not gross.

      Cheers, Mario

    • Mario cavolo April 18, 2012, 5:59 am

      Oh, U.S. Has 92k overseas income tax exclusion basically if you are truly overseas at least 335 days per year.

  • C.C. April 16, 2012, 6:34 pm

    “…niggardly yields.” Brings back fond memories of media hype in search of story. Remember that poor English fellow who uttered the word ‘niggardly’ in a piece that had absolutely nothing to do with – well, you know… Poor guy was put upon like nobody’s business – but he didn’t Back Down, and that was a beautiful sight to behold in a world of Political-Correctness gone Insane.

    • Rick Ackerman April 16, 2012, 7:53 pm

      Although there are numerous good synonyms for niggardly, I go out of my way to use the word so that racialist ignorance doesn’t bully it into obsolescence.

  • Rich April 16, 2012, 4:54 pm

    Re “In fact the SP500 holding at 1370 is very impressive.”

    So is 1365.31 SPX depressive GL…?

    • gary leibowitz April 16, 2012, 6:10 pm

      The fact that the low was 1360, way below the major support levels is impressive. 1370 and above indicates a possible sharp rebound. It can still break below 1360 and still have no technical damage.

      I can’t understand how domestic numbers are very good for the most part yet most here don’t believe it. Is the sales figures fudged? Someone must be spending in order to have 2 months of high sales.

      As for the debt problem, just like 4 years ago when we had this problem, time and money will forestall any real fix. As we have seen here it can take a long time before things catch up to reality. I agree that this only pathes up the problem and solves nothing. In fact since the EU is in such a worse shape than we ever were I suspect it will not last 4 years like it has here. That is why I give it another 12 months before the combination of austerity programs and mounting debt hits a wall.

      This world deflation spiral should be started by the EU, and not here. If it was contained in the United States we would have had a good chance of surviving without a deflationary depression. As it is I can’t see a good end result. I can however expect, as human nauture dictates, a good result here until the dam breaks. Human nature being what it is will use any means to stall the inevitable.

  • gary leibowitz April 16, 2012, 3:22 pm

    The test on how well the Spain debt problem is contained will be known this week. Bonds auctioned tomorrow and Thursday. As for the domestic front here are the recent headlines:

    “Equity futures advanced as retail sales gained 0.8 percent in March, almost three times as large as projected and followed a 1 percent advance in February.
    Earnings per share at S&P 500 companies rose 1.7 percent in the first quarter and will grow 8.6 percent this year, according to analysts estimates compiled by Bloomberg.”

    I suspect we break out after the recent foreign debt problem is contained. In fact the SP500 holding at 1370 is very impressive. If the next few weeks of earning season doesn’t cause any further damage to the market it should have another 9 to 12 month rally. The biggest domestic drag will be gas prices and it looks like it will acually go down or remain stable over the next few months, counter to seasonal trends.

    Anyone looking at this latest drop on a technical basis has to conclude it is nothing more than a normal correction. We shall see very soon if it hold up or not.

    • fallingman April 16, 2012, 5:29 pm

      What does “contained” mean exactly? Will it be contained if the ECB steps in and provides the backdoor support for the auctions this week? What about the next round, and the next, and the next?

      The auctions just keep coming, because Spain doesn’t have the money it needs to pay its bills. Great credit risk, huh? It’s a black hole. As Rick says, how long can you contain the crisis by pouring good money after bad?

      For a while? Yeah, I guess that if you’ve pointed the revolver at your head and pulled the trigger three times without incident, you might have another couple more reprieves coming.

      Did you read the article?

      The clock is ticking and there’s no easy way out. Do you disagree? Each successive idiotic money gush is providing less support and buying less time. Do you disagree?

      The situation isn’t getting better. It’s getting worse…fast. The “solution” of last month is the broken fix of today.

      Sounds like wishful thinking to me.

    • Steve April 17, 2012, 6:51 pm

      fallingman, its not nice to confuse everyone with the truth in regard to who is buying what bonds!

  • mario cavolo April 16, 2012, 9:59 am

    Follow the money, find the people who have the money to buy your stuff; a simple rule for business owners. Indeed, who is the most wealthy in terms of cash and therefore who do we want to export our stuff to if at all possible? Ahh, that would be, by far, the Chinese. Witness that as tourists, they spend more money than any other group of tourists including Japanese.

    And so the issue?…that the U.S. has in fact recently wised up to increase its exports to China, which thankfully creates jobs; while Germany has already done so, along with Japan, Korea and many other countries. So then the issue becomes that as the twisted flight to USD safety occur, this will boost the USD, and that’s not good for U.S. exports, making them more expensive. But it seems an inevitable development coming down the road, for awhile anyway, whether that be months or years. The final disintegration of the USD will probably happen, and in whatever unfathomable fashion it may unfold, but it is very possible such an occurence is a decade or more away as all of the opposing economic forces keep counteracting one another across the globe in unthinkable, unpredictable ways. I am much more confident suggesting that we and all the experts are in fact clueless as to what and how economic and political and systemic issues may unfold, than to suggest we can well plan for them.

    Cheers, Mario

    • Mark Uzick April 16, 2012, 1:06 pm

      Why would foreigners want to buy American goods if even Americans prefer not to buy them nor produce them either?

      American business is discouraged through taxation and regulations; businessmen are treated as semi-criminals; they may as well admit that sin taxes and related punitive regulations are in all but name only applicable to all businesses, especially industry and resource extraction. If American businesses want to sell their goods to the developing world, it makes more sense to emigrate their production to where it’s appreciated. That’s what they’ve done and that’s what they’re doing. American enterprise is a great success, but it no longer resides in its continental namesake; what’s left here is no longer America.

    • Mario cavolo April 16, 2012, 4:01 pm

      Spot on pragmatic points Mark. Interestingly, understand that the paychological mindset of a newly blossoming newly rich previously oppressed third world country such as China which has spent decades romantically admiring America from afar, is enamored by her famous brand names, just the ideology of somthing being American and what that represents, regardless of recent issues and problems. I would saymin searching for a comparison, Americans might somehow seem romantic about an item that is pure
      Italian like Ferrari, and so, owning it and wanting it is appealing on many levels. Nobody says “Oh I don’t want that car because their economy is in trouble, their bond yields are spiking, and their govt is communist.” 🙂

      Cheers, Mario

    • Robert April 16, 2012, 5:24 pm

      ” understand that the paychological mindset of a newly blossoming newly rich previously oppressed third world country such as China which has spent decades romantically admiring America from afar, is enamored by her famous brand names, just the ideology of somthing being American and what that represents, regardless of recent issues and problems”

      – Yes, it is uniquely ironic that the Chinese lust after products that are made just down the street in their own factories, but since they carry the copyright and label of a brand name originated in the US, they somehow promote a superior desire for personal possession…

      It seems “I wanna be, I wanna be like Mike” is patently true after all…

    • mario cavolo April 17, 2012, 6:13 am

      Robert! …yea that part is REALLY crazy! I’m here in China and I’m standing in one of the many official Nike stores paying full price for a pair of Nike’s that are made here in China!…copies next door but I want the authentic real export quality item. Worse, paying 50% more for a Mercedes or Audi or BMW compared to U.S. prices for the car made here in the Chinese factory for the Chinese market! Nuts, nuts, relative nuts…~!

  • Mark Ian Uzick April 16, 2012, 7:22 am

    Anyone who runs from the euro to the dollar, seeking safety, will get what anyone who sides with tyranny for safety deserves: he’ll be eaten alive.

    The dollar is in worse shape than the euro in every respect. The only thing propping it up – its reserve currency status – is really nothing more than its pseudo oil backing which replaced gold when the dollar went fiat that’s coming to an end – the real reason behind the acts of war against Iran. I say “pseudo” because there’s no fixed dollar price for oil, only an artificial demand for dollars that’s created by oil exporters requiring payment in dollars in response to US promises and threats that’s becoming progressively impotent as it’s being undermined on multiple fronts.

    • John Jay April 16, 2012, 7:48 pm

      The Dollar has been backed by Plutonium and Tritium for some time now. And everyone knows we are crazy enough to use those elements with extreme prejudice.
      The Spirit of Curtis LeMay is alive and well at the Pentagon. General LeMay told JFK Cuba was a “sideshow” and that we should “fry it”.
      I think the whole world knows what we are capable of if our backs are to the wall.

    • mario cavolo April 17, 2012, 6:08 am

      I agree with the point JJ, the U.S. nor its currency isn’t going anywhere despite the unprecedented deteriorations and shifts we see unfolding; because those deteriorations are both relative to and related to myriad other factors across the global economic, societal and political systems. It might sound ridiculous to remind everyone who saved Europe’s ASS 50 years ago, with many other similar stories, with the U.S. always the last place that any other country on planet earth goes when they need support. Even for example, as China has gotten far too aggressive in its dealings with its Southeast Asia neighbors over the past 2-3 years, where did they turn to ask for some help to ameliorate the issues?; the U.S.

      The Beatle’s….
      “Back to the U.S….
      Back to the U.S….
      Back to the U.SSAAAAA”

      Now Rick and many others rightfully point out that the U.S. has its own troubles/out of control debt/banking corruption issues et al, and so therefore can’t backstop its global neighbors in need any more. Indeed, we are all expecting some kind of train wreck followed by the unpredictable who knows what spiraling us all into societal and financial hell…

      Again let me , I’m not judging what I am framing here, I’m just observing what we see…

      Cheers, Mario

  • John Jay April 16, 2012, 6:38 am

    This is all the end result of the end of the Iron Curtain, and Nixon’s opening of China. That accelerated the transfer of Western Wealth to erstwhile closed markets.
    The Fed in this country covered up that transfer of wealth with money printing and increasingly lowered credit standards. Also helped along by serial bubbles, dot.com, housing, and public sector pensions. Well, the smoke has blown away, and the mirrors have all shattered. Now, the States of California, Illinois, and Michigan are staring reality in the face. In Europe it is Greece, Portugal, and Spain. There can never be enough good jobs and decent housing for 7 billion people. All very depressing.

    On a lighter note, it is Triple Crown season once more. I looked up the Pedigree of the Gray colt Hansen. Some great race horses amongst his ancestors. Eqineline.com is great place to look up Thoroughbred race horse pedigrees. I look back with great nostalgia at the golden days of Secretariat, Seattle Slew, and Affirmed, the last TC winner in 1978. If you compare the pedigrees of Affirmed , and his great rival Alydar, just about the same on the Sire side, no wonder they were so closely matched on the track. Racing legend has it that when Secretariat set that record of 2:24 for 1 1/2 miles at the Belmont, as Ron Turcotte was standing in the stirrups to slow him down, he set another track record for 1 5/8 miles, as he was slowing down! Those were the days!
    I hope this years TC is spectacular, we need some uplifting news!

    • Bam_Man April 16, 2012, 5:27 pm

      Highest marks for you John Jay!

      Very few people realize that Nixon’s “opening to China” and the “closing of the gold window” took place within six months of each other. What a co-incidence. Not!